Foreign Exchange Market Analysis Assignment PDF

Foreign Exchange Market Analysis

Executive Summary
The financial institutions play a significant role in managing and strengthening the economy
of a country. However, the financial institution faces problems while trading in the foreign
exchange market. The foreign exchange market enables the market participants to purchase,
sell, speculate and exchange currencies. The current and future market conditions will be
carried out in order to understand the performance of two currencies in the next three to six
months. The fluctuation in the market imposes a significant impact on the values of the
currencies. Thus, the economic factor influences the exchange rates in the market. The
collection of information will assist to determine the factors that have imposed an impact on
the market. The devise trading strategies would be implemented by the organizations on the
basis of the market circumstances. The strategies will assist the organization in making a
decision of which currency to purpose or sell. The portfolios of the currencies would be
created in order to enable the bank for taking advantage of the predicted changes in the
exchange rates. The trading strategies would be implemented by taking into account price
maker trading the currency on a daily basis based on the needs of the clients. An appropriate
understanding of the market is important as it enables to make decisions which lead to the
growth of the organization.
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Table of Contents
Executive Summary...............................................................................................................................1
Table of Contents..................................................................................................................................2
Introduction...........................................................................................................................................3
Analysis and market view (forecast)......................................................................................................3
Trading strategy.....................................................................................................................................5
Conclusion.............................................................................................................................................6
References.............................................................................................................................................8
Appendices..........................................................................................................................................10
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Introduction
Commonwealth Bank of Australia is the leading provider of financial services in Australia.
The bank also offers retail, fund management, insurance, superannuation, institutional
banking, share broking products and investment services (Commbank, 2018a). The main
objective of the report is to explain the market view concerning the behaviour of two
currency pairs over the next three to six months. It will also include trading strategies that
will be undertaken for maximizing the profit of the bank. AUD/USD currency pairs will be
taken because an Australian bank will be examined and US dollars is considered to be one of
the strongest currencies in the world. The current and future market conditions will be
examined in order to understand the exchange rates of the currency pairs. The analysis of the
economic factors will also be determined that influences the exchange rates. The devise
trading strategies would be implemented for the next six months on the basis of the market
view. The Commonwealth Bank of Australia will use the strategy for making a decision
which currency to buy or sell. The report will appropriately depict the market analysis,
trading strategies and concluding the main theme. The implementation of appropriate
strategies can assist an organization to overcome problems in an appropriate manner.
Analysis and market view (forecast)
The demand level for a currency imposes a significant impact on the market price. For
example, if people want to purchase AUD/USD and then sell it then the value of AUD would
go up. The increase in the selling of AUD/USD explains that AUD value would go down.
The AUD/USD shows that amount of US dollar is needed for purchasing an Australian
dollar. The changes in the economic factors of a nation impose significant impact on the
relationship between the values of two currency. If a decision is taken by Federal Reserve to
boost the economic growth of the country then the Australian dollar would depreciate in
relative to the US dollar. However, there are many factors that assist in determining the
strength and weakness of a currency. The economic growth, high volatility and increase in
the manufacturing activities in US lead to increase in the value of Australian dollar. It is due
to the close link between the commodity prices.
The AUD/USD is considered to be one of the well known currency pair used for carrying
trades. The traders are attracted towards the currency due to the rate of exchange fluctuations.
However, the values of these currencies are fluctuated due to the global market environment.
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